The United States Department of Justice or DOJ has struck the founding members of the Frosties project and has taken action against an alleged NFT rug pull as well as money laundering and commitment of fraud by the company.
Two founding members of the Frosties project have been accused of intentionally hiding their identity in order to conduct a “rug pull” on the platform. They have failed to deliver utility rewards promised to the NFT holders of their community (such as access to Metaverse gaming, exclusive access to the future mints, giveaways, etc.) and showed the project’s roadmap.
According to the statement released on March 24 by the Southern District of New York’s Attorney’s office, two guys named Andre Llacuna and Ethan Nguyen, who are in their twenties, have been arrested in Los Angeles. The duo has been charged with one count of conspiracy to commit money laundering and one count of wire fraud with a connection to a million-dollar defrauding scheme to trick the purchasers of NFT project ‘Frosties.’
The DOJ has complained that these two people have shut down and intentionally abandoned the project after selling all of their NFTs worth US 1.1 million dollars. After selling the NFTs, they had transferred the money to the various crypto wallets which are controlled by them. Moreover, they have conducted multiple transactions to complicate the source of the original funds.
The report released by DOJ also stated that the term “rug pull” indicates a scenario where the founder of a gaming project or an NFT platform seeks investment to further develop the project, but all of a sudden abandons the project without any kind of valid reasons and deceitfully retains the funds of the investors.
In this special release, Thomas Fattorusso, the IRS-CI Special Agent-in-Charge, has stated that his team is closely monitoring the crypto platforms and industry despite the fact that NFTs are new types of investment that have been introduced in the digital asset category. He further commented that the same rules apply everywhere, be it a real estate development or an NFT platform.
People are not allowed to take money from investors and abandon the project instantaneously and run away with the money that the investors have provided. The team of IRS-CI partnered with HSI to tightly monitor the crypto transaction with the focus to uncover alleged cryptocurrency schemes like the current one.
The duo was planning to prepare for the launch of another NFT project named “Ember”, which was projected to generate approximately US 1.5 million dollars prior to their arrest in Los Angeles. If they are found guilty of the incident, then both of them will have to stay behind bars for quite a long period of time (each of the counts has a maximum of a 20-year jail sentence).
Last year a lot of dodgy NFT projects came across the radar of the DOJ, and the department is right now focusing more on NFT projects this year using the National Cryptocurrency Enforcement Team (NCET) that was created during October 2021.